United Kingdom
Do you pay capital gains tax on an inherited property in the UK?
You pay no capital gains tax when you inherit a property. Tax arises only if you later sell it, and only on the growth since the date of death, because your cost is the probate value rather than what the deceased paid. A house valued at £300,000 for probate and sold for £330,000 produces an estimated £6,480 for a higher-rate taxpayer. The sale must be reported within 60 days.
| Tax due at the point of inheritance | None |
| Your cost for capital gains tax | The probate value at the date of death |
| Annual exempt amount | £3,000 per person |
| Rates | 18% then 24% |
| Reporting deadline | 60 days from completion |
| Tax on a £300,000 house sold for £330,000 | £6,480 (higher-rate) |
Do you pay capital gains tax when you inherit a house?
No. Inheriting a property is not a disposal, so no capital gains tax arises at that point, however valuable the property is. The charge only comes into view if and when you sell it, or give it away.
What can arise on a death is inheritance tax, and the two are constantly confused. Inheritance tax is charged on the estate, and it is normally the executors who deal with it before anything is distributed. Capital gains tax is charged on you personally, later, on the growth in value while you owned the property. They are separate taxes with separate rules, and paying one does not exempt you from the other.
What value do you use as your cost?
The probate value: the open market value of the property at the date of death. That figure is agreed as part of administering the estate, and it becomes your cost for capital gains tax. What the deceased originally paid is irrelevant to you.
This is the single most valuable thing to understand about an inherited property, because it removes decades of growth from the calculation. A house bought for £90,000 in the 1990s and worth £300,000 at the date of death carries a £210,000 gain that is simply never taxed on you.
| Cost used | Gain | Estimated tax |
|---|---|---|
| Probate value, £300,000 | £30,000 | £6,480 |
| What the deceased paid, £90,000 | £240,000 | £56,880 |
The same sale at £330,000 by a higher-rate taxpayer, worked both ways. The second row is the common mistake, and it overstates the tax by £50,400.
Because the probate value sets your cost, it is worth having a defensible one. A written valuation from a surveyor or an estate agent at the time carries far more weight than an estimate reconstructed years later, and HM Revenue and Customs can challenge a figure that looks low.
How much tax will you pay when you sell it?
On the growth since the date of death, after allowable costs, the £3,000 annual exempt amount and any relief. The rate is 18% on the part of the gain that fits in your unused basic-rate band and 24% above it.
The table takes a house valued at £300,000 for probate and prices the sale at five figures, for a basic-rate and a higher-rate seller.
| Sale price | Growth since death | Basic-rate seller | Higher-rate seller |
|---|---|---|---|
| £300,000 | £0 | £0 | £0 |
| £310,000 | £10,000 | £1,260 | £1,680 |
| £330,000 | £30,000 | £6,018 | £6,480 |
| £360,000 | £60,000 | £13,218 | £13,680 |
| £400,000 | £100,000 | £22,818 | £23,280 |
Probate value £300,000, sold without other costs, 2026/27. A basic-rate seller here has £30,000 of other income and a higher-rate seller £60,000.
Two things follow. A property sold soon after death, at roughly the probate value, usually produces no tax at all, because there has been almost no growth. And where the property has risen, the annual exempt amount alone covers the first £3,000 of it.
What can you deduct from the gain?
The costs of selling, and anything capital you spent on the property after inheriting it:
- Estate agent and solicitor fees on the sale.
- Capital improvements made since the death, such as an extension, that are still reflected in the value.
- The cost of establishing your title, in some cases, where the estate incurred it in transferring the property to you.
What does not reduce the gain, and is regularly claimed by mistake:
- Probate fees and the cost of the grant. These are costs of administering the estate, not of your disposal.
- Inheritance tax paid on the estate. It does not reduce your capital gain.
- Insurance, council tax and utilities paid while the property stood empty.
- Repairs and redecoration done to get the property ready for sale. These maintain value rather than add to it.
On the £330,000 sale above, £6,000 of agent and legal fees brings the estimated tax from £6,480 down to £5,040, so the paperwork is worth gathering.
What if you moved into the property?
Then Private Residence Relief comes into play. If the inherited property became your only or main home, the gain covering that period is relieved, along with the final 9 months of ownership whatever you were doing in them.
The relief is proportional: the months it was your main home plus the final 9, over the total months you owned it. Take a house valued at £300,000, sold four years later for £400,000, by a higher-rate taxpayer.
| Situation | Relief | Estimated tax |
|---|---|---|
| Left empty or let throughout | £0 | £23,280 |
| Lived in as your main home for 2 of the 4 years | £68,750 | £6,780 |
Probate value £300,000, sold for £400,000 after 48 months. In the second row relief covers 33 months of the 48.
Moving in has to be genuine. The test is whether the property was actually your only or main residence, judged on the facts, not on where post was sent.
What if you inherited it with someone else?
Each of you is taxed separately on your own share, which is usually better than it sounds. Every owner has their own £3,000 annual exempt amount and their own basic-rate band, so the gain is measured against each person's income rather than all of it against one.
On the £330,000 sale, a single higher-rate owner pays an estimated £6,480. The same sale split between two owners comes to £5,760, and less again where one of them has little income.
Where the property is still held by the executors and sold by the estate rather than distributed first, the estate is taxed instead, at its own rate and with its own limited allowance. Which route is used matters, and it is decided during the administration, so it is worth raising with whoever is handling the estate before the property is sold.
When must the sale be reported?
Within 60 days of completion, through an HM Revenue and Customs Capital Gains Tax on UK property account, and the tax is payable by the same date. The deadline runs from completion, not from exchange and not from the end of the tax year.
If the whole gain is covered by relief or by the annual exempt amount, a UK resident generally does not have to file that return. A non-resident selling UK property must report every disposal whether or not any tax is due.
Late filing brings an automatic penalty and interest on the unpaid tax. Because an inherited property is often sold by people also dealing with an estate, this is a deadline that slips easily, and it is worth diarising on the day contracts are exchanged.
What do people get wrong most often?
- Using the price the deceased paid. The cost is the probate value, and using the original price can overstate the tax by tens of thousands.
- Assuming inheritance tax settles everything. The two taxes are separate, and paying one does not remove the other.
- Not getting a proper valuation at the date of death. A weak figure is hard to defend later and can be challenged.
- Deducting probate costs or inheritance tax. Neither reduces the capital gain.
- Treating repairs before sale as improvements. Redecorating is maintenance.
- Forgetting each beneficiary has their own allowance when a property is inherited in shares.
- Missing the 60-day window while the estate is still being wound up.
Work out your own figure with the inherited property calculator
Common questions
Do you pay capital gains tax on an inherited property?
Not when you inherit it. Capital gains tax applies only if you later sell, and only on the growth between the date of death and the sale. Your cost is the probate value, so a property sold soon after death at around that value usually produces no tax at all.
What value do I use for an inherited property?
The probate value, meaning the open market value at the date of death, agreed while the estate was administered. What the deceased originally paid does not affect your calculation. Keep the written valuation, because HM Revenue and Customs can challenge a figure that looks understated.
Do I pay both inheritance tax and capital gains tax?
They are separate charges and both can arise. Inheritance tax falls on the estate and is normally settled by the executors before anything is distributed. Capital gains tax falls on you, later, on the growth in value after the date of death.
Can I deduct probate fees or inheritance tax from the gain?
No. Probate fees, the cost of the grant and any inheritance tax paid by the estate are costs of administering the estate, not costs of your disposal, so none of them reduce your capital gain. Selling costs and capital improvements made after you inherited do reduce it.
How much capital gains tax on an inherited house sold for £330,000?
If the probate value was £300,000, the growth is £30,000. After the £3,000 annual exempt amount a higher-rate taxpayer pays an estimated £6,480, and less again after deducting agent and legal fees. Two owners sharing the sale would pay about £5,760 between them.
What if I lived in the inherited property before selling it?
Private Residence Relief covers the period it was your only or main home, plus the final 9 months of ownership. The relief is proportional to how long you lived there against how long you owned it, so living in it for part of the period reduces the tax rather than removing it.
This is an estimate for general information only, not tax, legal or financial advice. Tax rules are complex and depend on your circumstances, and figures may not reflect the latest changes. Confirm your position with HM Revenue & Customs (gov.uk) or a qualified tax adviser before acting. The terms of use set out the limits of this estimate and of our liability.
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